Conditional Violation of Weak-Form Market Efficiency: The Autoregressive Component of Stock Returns with Consideration to the Return Distribution

34 Pages Posted: 16 May 2017

See all articles by Benjamin Jansen

Benjamin Jansen

Middle Tennessee State University - Department of Economics and Finance

Date Written: May 14, 2017

Abstract

This paper presents evidence suggestive of a conditional violation of weak-form market efficiency. Evidence suggests that the AR coefficient monotonically decreases along the return distribution, for each value and equal weighted market indices. These results suggest that the AR coefficient is statistically and economically significant in the tails of the stock return distribution, which implies conditional weak-form predictability in extreme market conditions. This finding may also help explain why prior studies have found autocorrelations of varying sign and significance within similar time horizons.

Keywords: Market Efficiency, Autoregression, Return Distribution

JEL Classification: C46, G12, G14

Suggested Citation

Jansen, Benjamin, Conditional Violation of Weak-Form Market Efficiency: The Autoregressive Component of Stock Returns with Consideration to the Return Distribution (May 14, 2017). Available at SSRN: https://ssrn.com/abstract=2968119 or http://dx.doi.org/10.2139/ssrn.2968119

Benjamin Jansen (Contact Author)

Middle Tennessee State University - Department of Economics and Finance ( email )

Murfreesboro, TN 37132
United States

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